Asking for greater increments of government funding is one thing, but in my view, the opportunities offered by open innovation are of a different scale entirely.
Indeed, scale is critical, a point noted in the recent report on collaborative innovation, Innovate and Prosper, by the Australian Technology Network of Universities and the Australian Industry Group: “While the size of the average Australian business presents a barrier [to innovation], so does the size of the industries. There is simply not sufficient scale and size in many industries to justify significant investment in innovation, which suggests the need for a more targeted approach.”
Another conclusion could be drawn. Instead of running up the white flag on innovation in smaller industries, we could try to better connect those industries to the global networks that could make innovation profitable. We may talk about creating our own Silicon Valley, and by all means let’s try. But better still to be directly plugged into the existing Silicon Valley, a single 14-hour flight from Sydney.
So what does a globally connected innovation system look like? When Procter & Gamble experienced slowing sales growth in the late 1990s, the company implemented an outwardly focused open innovation strategy. Its Chief Technology Officer at the time emphasised the point that R&D could become C&D—‘Connect & Develop’. P&G employed more than 7,500 R&D staff, yet it was estimated that there were approximately 1.5 million researchers around the world working in the same areas, at levels equal to or better than P&G’s internal expertise.
P&G regularly identifies consumer needs that are broken down into discrete problems, described in technology briefs. The company then takes the technology briefs to its supplier networks and various open networks. In 2006, P&G’s top suppliers had an estimated R&D staff of 50,000. P&G helped create NineSigma, one of many open innovation firms that connect companies with universities, government, and private labs. NineSigma has a presence here in Australia.
On top of this, P&G’s Technology Entrepreneurs network uses advanced analytics to mine billions of public documents for innovation opportunities. That sort of service is becoming increasingly widespread. For example, the UK organisation 100% Open offers an ‘Innovation Radar’ service that combines proprietary web search with their own database of over 200,000 companies. Interestingly, 100% Open spun out of NESTA in 2010, the UK’s National Endowment for Science, Technology and the Arts. Its clients range from Oracle to Oxfam, and they claim an average tenfold return on investment.
And the result for P&G? In 2006, the company reported an increase in R&D productivity of nearly 60%, with an innovation success rate that had more than doubled.
Let me now return to another theme from the Innovate and Prosper report, indeed its central theme: “By not collaborating, public expenditure may be prioritised by the research sector in areas that are detached from the innovation needs of end users in industry and the community.” Their main recommendation is the rebalancing of funding towards industry needs, but as you might now infer, I think distributed open innovation platforms offer the superior option.
We need market-based signals for innovation via the right platforms, and this is where policy can focus its attention. Like currency in the economy, an innovation market needs the right fluid to connect opportunities.
This post is an excerpt from Andrew Botros’s speech to The Warren Centre for Advanced Engineering’s Governors Program luncheon, 17 June 2015. His research on open innovation in government was published in the Australian Journal of Public Administration.